FERC considers hydro license term policy

Monday, November 28, 2016

U.S. hydropower regulators have requested public comments on whether to revise a policy setting the length of license terms for hydroelectric projects.  The Federal Energy Regulatory Commission's notice of inquiry could lead to changes in how the Commission sets license terms.

Under Section 6 of the Federal Power Act, the Commission may issue hydropower licenses for a term not to exceed 50 years.  Original licenses have no minimum license term.  Section 15(e) of the Federal Power Act provides that any new license (i.e. relicense) shall be for a term that the Commission determines to be in the public interest, but not less than 30 years or more than 50 years.

Within these statutory bounds, the Commission has discretion to set its own policy governing the term length of hydropower licenses.  At present, the Commission policy is to set a 50-year term for licenses issued for projects located at federal dams. For projects located at non-federal dams, the Commission’s current policy is to set a 30-year term where there is little or no authorized redevelopment, new construction, or environmental mitigation and enhancement; a 40-year term for a license involving a moderate amount of these activities; and a 50- year term where there is an extensive amount of such activity.

The Commission has described the purpose of this policy as "to ease the economic impact of new costs, promote balanced and comprehensive development of renewable power generating resources, and encourage licensees to be better environmental stewards."  But the lengths of new licenses have been contested in several recent relicensing proceedings, in which parties have argued that the Commission should have considered or given more weight to other factors.  These other factors proposed for consideration include capacity-related investments or environmental enhancements made by the licensee during the current license and before issuance of the new license; total cost of the relicensing process; losses in generation value related to environmental measures; the license terms of projects that the licensee states are similarly situated to its project; and the license term provided for in settlement agreements.

In a November 17, 2016 notice of inquiry, the Commission outlined five potential options that Commission staff has identified for establishing license terms:
(1) retain the existing license term policy; (2) add to the existing license term policy the consideration of measures implemented under the prior license; (3) replace the existing license term policy with a 50- year default license term unless the Commission determines that a lesser license term would be in the public interest (f or example, to better coordinate, to the extent feasible, the license terms for projects in the same river basin for future consideration of cumulative impacts); (4) add a more quantitative cost- based analysis to the existing license term policy ; and (5) alter current policy to accept the longer license term agreed upon in an applicable settlement agreement, when appropriate. 
The Commission now seeks comment on issues relating to license terms, due within 60 days from the Notice of Inquiry's November 25 publication in the Federal Register.

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